Berkshire Hathaway, Dick's Sporting Goods, YUM Brands, ADTRAN and JP Morgan highlighted as Zacks Bull and Bear of the Day
CHICAGO, Oct. 7, 2013 /PRNewswire/ -- Zacks Equity Research highlights Berkshire Hathaway (NYSE: BRK.B-Free Report) as the Bull of the Day and Dick's Sporting Goods (NYSE: DKS-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis ontheYUM Brands (NYSE: YUM-Free Report), ADTRAN (Nasdaq: ADTN-Free Report) and JP Morgan (NYSE: JPM-Free Report).
Here is a synopsis of all five stocks:
While some might not be familiar with the name of 'Berkshire Hathaway' (NYSE: BRK.B-Free Report) every investor has undoubtedly heard of the man at the helm of this company, Warren Buffett. The current CEO and Chairman, Buffett has guided Berkshire from a small textile company into the massive conglomerate it is today.
Today, Berkshire Hathaway engages in a number of businesses, but has a focus on property and casualty insurance. The company uses the premiums from this business, before claims are paid out (called the 'float'), to buy up investments in other industries.
While the firm does have a number of wholly-owned companies—including railroads, newspapers, and clothing companies just to name a few—it also has big holdings in several of the most easily recognizable American brands too. These include firms like American Express, The Coca-Cola Companyand International Business Machines,although the list stretches far beyond this trio.
Either way, as primarily an insurance business that has had great success in its investment portfolio, the company is also benefiting from recent trends in the space. A wider spread between long and short term rates has certainly helped the company, while a booming stock market has also increased Berkshire's value.
Thanks to this trend, BRK.B is looking pretty good from an earnings estimate revisions picture. Analysts have recently bumped up their expectations for the company, including one increase in just the past seven days.
Thanks to concerns about continued gains in the housing market, high oil prices, and still sluggish job growth, some are starting to grow worried about the retail sector. Add in high levels of competition, and a number of firms could be facing rough trading to close out the year.
One such firm that may be in this camp is Dick's Sporting Goods (NYSE: DKS-Free Report). Dick's is a mid-cap retailer specializing in sporting goods, along with selling golf equipment, and hunting and fishing gear. The Pennsylvania-based firm has expanded across the nation and is now in 44 states operating over 500 locations.
Consumers have embraced the company over the long term, and DKS has also seen solid returns in the YTD time frame. However, the company is certainly prone to periods of high volatility, and with some of the broad trends in the marketplace, this could definitely take place in the tail end of 2013.
In addition to the broad trends in the market, investors should note that the earnings estimate revision picture isn't that great. Analysts have been scaling back their expectations for DKS in both the short and long term, pushing down the EPS consensus for the firm.
In fact, 19 estimates have gone lower in the past 60 days for DKS, while only four have gone up in the past month, when looking at the full year time frame. This has pushed the consensus estimate for the current year earnings of DKS down from $2.85/share 90 days ago, to just $2.64 today.
3 Ideas for the Week's Earnings
Earnings season heats up next week. In the spirit of the season, I thought it might be worth taking a look at a few provocative charts of companies releasing earnings next week. The charts provide a technical backdrop into the release of fresh fundamental information. They could be launching pads for price strength. Here are three to watch:
YUM releases its profit report after the close on Tuesday. This restaurant operator has been trading in a range since the spring of 2012. The company has been dogged by poor results in China and contracting same store sales. However, technically it is near the upper half of its trading range and a clean move over the $75 region could generate some momentum buying. The bottom end of the range in the $61.00 to 62.00 area is a long way down. Its MACD (moving average convergence-divergence) and volume fail to provide much direction. Could earnings be a catalyst for an upside breakout?
The bull story for the stock comes from easy comparisons in China. Due to weak results in China in recent years, comps have been negative since Q4 2012. This easy base effect could brighten the sales picture and energize the stock. It is worth watching. An actual change in sales momentum on a low same store sales base would get attention. The stocks' sideways pattern occurred when same store sales began their marked deceleration/decline.
According to the Zacks Consensus, YUM is expected to earn $0.93 in the reporting quarter and $0.87 in the quarter ending December. YUM has a decent track record of posting positive earnings surprise. It has beat 16 of the last 18 quarters.
ADTN releases its earnings Tuesday afternoon. This provider of networking and communication equipment has been trending upward since the fall of 2012 and is currently in a small channel consolidating for what seems to be a new leg higher. A rally over the $28 area would push prices above the channel and be a constructive dynamic for the uptrend arguing for continued strength. Not only has the $28 level provided resistance in recent weeks, but going back to the spring/summer period of 2012 off a set of old lows.
Based on the Zacks Consensus ADTN is expected to earn $0.22 in the reporting quarter and $0.19 in the December quarter. ADTN has a history of posting positive earnings surprises. It has not missed an estimate over the last 18 quarters, but has matched expectations twice in this time period.
JPM reports on Friday morning. JPM has established a shelf of support in the $49 to $50 area. At the same time, it has been able to recover from declines below $50 in recent weeks. Momentum is improving given the uptrend in the MACD and the recent drop below $50 was not confirmed by the MACD. This bullish divergence is constructive for a rally. Furthermore, the formation since late August looks like a potential double bottom. A rally over the recent high at $53.87 would set the stage for the double bottom to be confirmed and project a move back toward the highs over $56 into the $58 area.
According to the Zacks Consensus, JPM is expected to earn $1.27 in the reporting quarter. Earnings in the banking sector are very noisy, but the stock has a history of generating positive earnings surprises. It has only disappointed once over the last 18 quarterly earnings releases.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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